Category Archives: Financial issues

Shanghai choosing quality over quantity?

Last year, Shanghai’s GDP growth rate reached 7%. Although this figure is impressive according to European standards, it is lower than the national rate of 7.4%

This year, the Shanghai government has decided not to set a growth target. It is the first Chinese city to abandon GDP growth forecasts. The objective of this policy is to switch from growth at all costs to sustainable and innovative development.

More information to be find at: Wildau, G. (2015). Shanghai first major Chinese region to ditch GDP growth target. January 26, 2015, The Financial Times. Retrieved February 14, 2015 from http://www.ft.com/cms/s/0/2c822efc-a51d-11e4-bf11-00144feab7de.html#axzz3Ro8Q8zl9.

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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Uxcester Garden City project

David Rudlin of URBED was the winner of the Wolfson Economics Prize 2014, announced in September 2014, with the Uxcester Garden City project:

Vision:  We illustrate how the city of Uxcester could double its size by adding three substantial urban extensions each housing around 50,000 people. These lie within a zone 10km from the city centre and are configured as triangles with only the point touching the edge of the settlement. The farmland around the city is currently not accessible to the public and of little ecological value. The concept is that for every hectare of development another will be given back to the city as accessible public space, forests, lakes country parks etc… Each of these satellite extensions would be served by a tram or Bus Rapid Transit (BRT) running from the existing mainline station on disused lines and then switching to on-street running to loop through the new neighbourhoods. The housing would be developed incrementally to create space for small developers and self-builders alongside the volume housebuilders in a process that recreates the way that the great estates were built in London.   

Popularity: Extending an existing city solves some problems but creates others. The greatest of these will be the task of winning over the existing community, which is likely to be articulate and honed by years of experience resisting development. We suggest a ‘Social Contract’ that would address the concerns of this community. Rather than a future spent fighting years of ill-planned development, the Garden City would offer the prospect of a clear 40 year vision that accommodates development while minimising its impact. The satellite extensions are planned to minimise their visual impact, to create a green grid of accessible open space and to generate investment in new transport infrastructure and city centre facilities to benefit the whole of the community. The aim is to re-frame the argument by getting cities to bid to be designated as a Garden City as they currently bid for City of Culture. 

Economic Viability and Governance:  In the absence of large scale subsidy the only solution to the economics of the Garden City is what Ebenezer Howard called the ‘unearned increment’. We are proposing a deal for landowners in which they trade a small chance of securing a housing consent on their land, for a guarantee of receiving existing use value plus substantial compensation and a financial stake in the Garden City Trust. We have assumed that the land will be brought at an average cost of £350,000 per hectare, 20 times its current agricultural value but only 15% of its value as housing land. The economics of the scheme are based on these differentials. We have assumed that, by extending an existing town rather than building from scratch we can reduce the infrastructure bill from £80,000 to £60,000 per unit. Even assuming that half of the land acquired is used as open space, this still generates sufficient value to fund this level of infrastructure spending. By selling the sites to developers at a fixed price and providing the infrastructure collectively, a market incentive will be created to invest in the quality of the housing.   

The process would be managed by the Garden City Trust that would be owned jointly by the local councils, central government, the local community and land owners – and their stakes would have a tradable capital value. The Garden City Trust would be vested with the land, would commission masterplanning work and then use the equity of the land to raise a Bond to fund the initial investment in infrastructure. Development would take place on a rolling programme with the early land receipts being reinvested. The experience in Holland suggests that such a rolling programme can procure infrastructure investment three times greater that the value of the initial bond.    

We describe the seven ages of the Garden City Trust from its conception and birth through its infancy and adolescence to maturity, middle age and eventually retirement. Over time the role of the trust will evolve as it moves from the development stage to the management phase where it will be structured to enable the local community to take on the stewardship of their neighbourhoods. Rising values over the life of the project will allow initial investments to be repaid. This is not a new model, it is the modern day equivalent of the great estates like Grosvenor or The Bournville Village Trust. 

Our model addresses the weaknesses in the system that have made it so difficult to match the quality of the schemes we admire on the continent. We have debated as a team whether we are being too ambitious with the size of the settlement we are proposing. However nationally we need to increase housing production by the equivalent of one Milton Keynes every year. We therefore need bold strokes to radically increase the rate at which we are building and Uxcester provides a model to do just this. 

For more information on URBED and the submission, click here: http://www.urbed.coop/wolfson-economic-prize

Miguel Elosua

Spanish qualified lawyer; PhD in Chinese Law. UrbaChina Research Officer. Has lived in China since 2006.

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Second homes in Hainan (I): reducing dependency.

As noted in a previous post, the second home phenomenon in China is quite different from the one in Western countries. Most of them are not exactly holiday homes, but are bought for other purposes. On exception may be Hainan: the southern island is presented as a major tourist destination and so the island has attracted thousands of Mainlanders who wish to spend a few weeks per year under the sun. But second home acquisitions in Hainan are also motivated by speculation. Per consequence, this phenomenon needs be carefully scrutinized by local authorities, and more actions should be taken to reduce the local dependency to the real estate sector.

In the past, in the early years of reforms, Hainan was doomed by real estate speculation and this partly caused the economic turmoil the island experienced in the late 90’s.

Since then, the island has been recovering thanks to the development of tourism.  With tourism and the rising of Chinese middle-class, second homes have appeared in Hainan. According to Wang Xiaoxiaà in in 2006, 25,000 second homes could be found Haikou1.

In 2010 was launched an ambitious plan to transform Hainan into an international destination by 2020. This decision boosted the housing sector on the island, but for fear of overheating, the local government limited the number of acquisitions one may purchased in Hainan. In spite of these measures, the island experienced a strong increase of real estate prices, and Sanya, Hainan’s main resort city, has become the 5th most expensive Chinese city.

For the local authorities, real estate and construction have gradually become their main financial resources. For the first semester 2014, more than one third of the provincial GDP was produced by real estate, this figure reached nearly three-fourths in Sanya2.

This causes the whole economy of Hainan to be very dependent on real estate.  And the bad news is that real estate in Hainan is very volatile and speculative. Most real estate programmes do not answer local housing demands but target wealthy Mainlanders, and since the beginning of this year, sales have started to drop.

This should drive the local government of Hainan to reconsider its strategy and diversify the island’s economic activities.

————

I have studied this aspect of the development of tourism in Hainan in my Ph.D. dissertation entitled “Les politiques de développement regional d’une zone périphérique chinoise, le cas de la province de Hainan (Regional development policies in a Chinese peripheral region: the case of Hainan province). This dissertation was defended on December, 18, 2014, and will soon be available online.

  1. WANG Xiaoxiao (2006), The second home phenomenon in Haikou, Master thesis, University of Waterloo, Canada. Retreived December 20, 2015 from http://etd.uwaterloo.ca/etd/x42wang2006.pdf []
  2. DOI, Noriyuki (2014), ‘Chinese housing prices still sliding’, Nikkei Asian review, August, 24. Retreived September 20, 2014 from http://asia.nikkei.com/Politics-Economy/Economy/Chinese-housing-prices-still-sliding []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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Working paper UrbaChina no.4 now online

The UrbaChina team is pleased to announce the publication of the 4th UrbaChina working paper entitled “Central-local authority relationships and the institutional process of city creation“, edited by Ai Chi-han (Nanfang College, Sun Yat-sen University), Miguel Elosua (EHESS) and prof. Li Shantong (DRC).

As one of the fastest-growing economies in the world, China is experiencing the largest scale of urbanisation in human history. More and more land is required to support this massive urbanisation. However, rural land acquisition and compensation to the changes in farmers’ household registration (hukou) are complex issues in the process of urbanisation under the dual land tenure between city and rural areas in China. Furthermore, local government has been under increasing financial pressure after the tax sharing system was implemented in 1994. To raise funds and develop urban construction, various cities have undertaken different strategies of land development during their on-going urbanisation, which is also discussed in this study. Urbanisation is a process of expanding urban space with a view to develop the land efficiently. Therefore, the objective of this study is to introduce the dual land system in China, the evolution of farmers’ collective land ownership, and the process of governmental land acquisition. Subsequently, we will examine the case of the case of Shanghai Pudong New Area, which develops land with an insufficient financial support and its corresponding solutions. Finally, the authors highlight problems in the process of land acquisition and land development.

The UrbaChina working paper no.4 is now available on open access at the hal-FP7 UrbaChina paper collection.

Recommended citation: Ai, C., Elosua, M., & Li, Shantong. (2014). Central-local authority relationships and the institutional process of city creation (UrbaChina Working Paper no.4 October 2014). Paris: CNRS. Retrieved from https://hal.archives-ouvertes.fr/hal-01076092v1

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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When fiscal recentralisation meets urban reforms

Fu, Qiang. (2014) When fiscal recentralisation meets urban reforms : prefectural landfinance and its association with access to housing in urban China. Urban Studies. Prepublished October, 8, 2014. DOI: 10.1177/0042098014552760

By retrieving household-level information from 127,938 household heads and fiscal data from 177 prefectures located in eastern and central China, this research quantifies the net association between land finance and urban housing tenure. While the results demonstrate that in 2005 China’s urban housing market remained stratified and simultaneously favoured individuals possessing economic, political and human capital, the key finding is that, net of other household- and prefecture-level effects, land finance is significantly and negatively associated with local homeownership. Moreover, both the demand and supply sides of the urban housing market contribute to such net association. By demonstrating the internal links between urban housing and local finance, this research not only provides a more holistic view of housing stratification during institutionalchanges but also lends empirical support to conceptual frameworks that explain a territory-based coalition between local governments and selective enterprises.

Read full text on Sage Journals Online (restricted access)

 

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Making China’s urban transportation boom sustainable

Zhao, Zhirong Jerry (2014). Making China’surban transportation boom sustainable.  (Paulson Policy Memorenda). Chicago, IL : The Paulson Institute.

China’s economic takeoff of recent decades has been accompanied by the dazzling growth of the nation’s transportation infrastructure. China’s total highway mileage had reached a staggering 4.2 million kilometers (km)  (2.6 million miles) by 2012, expanding from just 126,675 km (78,712 miles) in 1949. Railroads in operation increased from 22,900 km (14,229 miles) in 1952 to 98,000 km (60,894 miles) in 2012, including more than 9,360 km (5,816 miles) of high-speed rail (HSR) that moves sleek passenger trains between China’s major urban centers at speeds that clock in at over 200km (124 miles)/h.

In China’s current subway boom, meanwhile, not only are megacities like Beijing and Shanghai actively adding new lines and extensions (see Figure 1) but smaller Chinese cities are also racing to open their first subway lines. 

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Urbanization, development, and China’s “land-lost”

Lian, Hongping and Raul P. Lejano (2014). Interpreting institutional fit: urbanization, development, and China’s “land-lost”World Development, 61, pp.1-10.

Urbanization-led development brings not just demographic, technological, and economic change, but profound institutional transition, as well. The scale and pace of China’s urbanization project have generated a crisis for millions living in rural–urban peripheries. We will utilize a model of institutional fit to conduct a critical analysis of China’s urbanization program and its implementation problems. Utilizing a semi-structured interview format, we analyze the experiences of the so-called “land-lost” residents in Changsha, China, vis-à-vis this ongoing institutional transition. The analysis provides a rich account of the myriad ways the transition to a privatized property market runs counter to the collective nature of peri-urban Chinese communities.

Read full text article on ScienceDirect (restricted access)

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Poverty reduction and effects of pro-poor policies in rural China

Li, Shi (2014). Poverty reduction and effects of pro-poor policies in rural China. China & World Economy, 22, p. 22–41. Pre-published online: 12 March 2014. DOI: 10.1111/j.1749-124X.2014.12060.x

The present paper describes changes in poverty reduction in recent decades and the effects of income growth and inequality on poverty reduction in rural China. The paper also examines the main poverty alleviation policies implemented in rural areas over the past 10 years and assesses the effectiveness and efficiency of these policies from the perspective of targeting accuracy. It is found that China has achieved significant progress in rural poverty reduction in recent decades, although the speed of poverty reduction has varied from one period to another. The largest contribution to rural poverty reduction has been economic growth, which has been increasingly offset by the inequality effect on poverty reduction. In addition, poverty alleviation policies are effective, but not efficient.

Read full text article on Wiley Library Online (restricted access).

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Urbanization, land development, and land financing: evidence from Chinese cities

Ye, L. and Wu, A. M. (2014). Urbanization, land development, and land financing: evidence from Chinese cities. Journal of Urban Affairs. Prepublished April, 14, 2014, doi: 10.1111/juaf.12105

China’s urbanization is significant worldwide. This process is characterized by underurbanization of population and fast urban land expansion. The driving forces behind this expansion and their rationale are not fully understood and empirically tested. This study fills this gap by analyzing panel data from 1999–2009 for all 286 prefecture-level cities in China. The findings reveal that land financing, using different measures, significantly contributed to land urbanization in China. Economically stronger cities with higher real estate investment more aggressively pushed for land urbanization. The true purpose of urbanization should be improving the living standard, not to generate revenue. It is suggested that urbanization can serve its justified goals only if fiscal and political relations between central and local governments can be adjusted. As more data become available, future studies are encouraged to further explore the subject by investigating additional factors and the latest trend of urbanization in China.

 

 

 

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Post-doctoral Fellow: Political economy of land development in China’s metropolises

Post-doctoral Fellow: Political economy of land development in China’s metropolises
Department of Geography, Faculty of Social Sciences, The University of Hong Kong (China)

Applicants are invited for appointment as Post-doctoral Fellow in the Department of Geography, Faculty of Social Sciences, from September 1, 2014 or as soon as possible thereafter, but not later than February 28, 2015. The appointment will be made for a period of 3 years.

We are seeking energetic and productive candidates to strengthen our ongoing research on China’s urban and regional development. Applicants should have research experiences in one or preferably more of the following key subfields in the study of China:

  • political economy of land development in China’s metropolises;
  • central-local relations and land finance;
  • urban internal restructuring and redevelopments of urban land;
  • mega-events, local debts, and uneven urban developments;
  • privatization of SOEs and redevelopment of their land.

A Ph.D. degree in Geography or a closely related discipline (politics, sociology, economics, planning, etc.) and a demonstrated record of relevant scholarly publications are required. Relevant field work experience in China is desirable. The appointee will participate in an interdisciplinary research project concerning land development in China’s metropolises: A political economy perspective under the University’s strategic research theme on contemporary China studies.

Information about the Department can be obtained at http://geog.hku.hk.

Enquires about the post should be addressed to the project leader, Professor George C.S. Lin (e-mail: gcslin@hku.hk) or Mr. Tommy Liu (e-mail: twkliu@hku.hk), Executive Officer, Department of Geography.

Applications close on 30 April 2014.

A highly competitive salary commensurate with qualifications and experience will be offered. The appointment carries leave, and medical/dental benefits.

Applicants should send a completed application form, together with a C.V., by e-mail to geogjobs@hku.hk. They should also arrange for submission, to the same email address as above, three references from senior academics, who are familiar with their academic and research background, skills and experience. Please indicate clearly “Post-doctoral Fellow in Contemporary China Studies” in the subject of the e-mail.

Application forms (341/1111) can be obtained at http://www.hku.hk/apptunit/form-ext.doc. Further particulars can be obtained at http://jobs.hku.hk

or at http://geog.hku.hk/about_JOB.html

The University thanks applicants for their interests, but advise that only short-listed applicants will be notified of the application result.

 

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Developing private health insurance in China?

Prof. Feldstein1 recently advocated the develoment of private health insurance in China as a remedy  for high saving rate and poor health care.

But the main reason why Chinese households save so much of their relatively low salaries is to ensure that they have the funds to meet high medical costs if a family member requires surgery or other inpatient care. People save so much because insurance is so inadequate. The government’s universal health-care insurance is very rudimentary, and private health insurance is not widely available. So households accumulate large amounts of cash as a hedge against the possibility that those funds will be needed some day for hospital care.

Prof Feldstein’s full article

  1. Martin Feldstein (2014).  A healthy path to Chinese consumption growth. Project Syndicate, March 31, 2014 []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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Financing Chinese cities

In a recent article published in a multi-author volume on the financing of urban centres in developing countries1, Christine Wong examines the financing of Chinese cities.

One of the many strengths of this article is that it introduces readers to how Chinese cities are financed and the evolution of this process over the last thirty years. The author offers us a very pedagogical picture of China’s fiscal system and its main challenges.

Wong starts with a review of the recent history of urbanisation in China. For her, this rapid urbanisation of China is only a catching-up process; China is still not as urbanised as other middle-income countries.

She then looks at the administrative structure of local governments and its impact on local finance. She highlights three important facts to help understand China’s local finance. Firstly, local governments are in charge of most of the spending from infrastructures to basic services (education and health), but lack taxing powers. Secondly, there are huge discrepancies of revenues between localities. Thirdly, because economic growth was the main objective, the central government closed its eyes to local governments using backdoor practices to finance their budget.

In order to finance new infrastructures, local governments needed economic growth, and so real estate became a main pillar of local government finance. Land lease sales became a major fiscal resource for local governments, who profited from the transformation of rural land to urban land. However, Wong stresses the unsustainability of such a system, as land can only be sold once and it is a finite resource.

Wong also introduces the reader to the local investment corporations (LICs) and the way they have been used by local governments to finance their infrastructures. As local governments are not allowed to take out loans, they use these LICs to borrow money. However, because of poor supervision, Wong warns against potential debt issues in China.

The author makes a plea for the complete renovation and rationalization of China’s fiscal system. She argues that the economic and social transition undergone by China makes necessary the creation of a new fiscal system that would be more sustainable.

  1. Wong, C. (2013) Paying for urbanization: challenges for China’s municipal finance in the 21st  century. In R. Bahl, J. Linn & D. Wetzel (Eds.). Metropolitan government finances in developing countries (pp.283-308). Cambridge, MA: Lincoln Institute for Land Policy. Retreived 20 January, 2013 from http://chinastudies.unimelb.edu.au/sites/www.chinastudies.unimelb.edu.au/files/1%5D%20metro%20paper_chapter_11.pdf []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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World tallest skyscraper in Dubai? No, Changsha.

Sky-CityWhere will the world’s tallest skyscraper be erected next? In Dubai, London, New York, Shanghai? The correct answer is in Changsha, Hunan. Currently, few people outside China can point Changsha out on a map. The city is best known for its communist past (Mao spent his youth in Changsha), but that will change if it becomes home to the “Sky City” tower.

The plans for the “Sky City” state that it will reach 838 meters and will take only 90 days to build. This rapid and unprecedented construction will be possible thanks to the use of pre-fabricated units1.

However, last July authorities halted construction because the building company had not completed all the necessary legal procedures2. Furthermore, experts are concerned about safety issues and question the company’s ability to build such a tall structure, as it has previously only constructed a handful of small buildings.

It is possible that this company, “Broad Sustainable Building”, has the innovative technology to construct high structures; in which case, their architects will soon be as famous as Gustave Eiffel. Be that as it may, perhaps a more important question relating to this project is why are taller and taller structures constantly being built?

Certainly, his “Sky City” tower would help Changsha increase its attractiveness. I am sure tourists would enjoy visiting this unique structure. But for how long? The problem with this kind of “record-breaking building” is that soon another “record-breaking building” will be planned and steal the limelight. In less than two decades, the race to build the tallest structure has taken a frantic pace. In 1998, Kuala Lumpur’s Petronas towers (452 meters) were inaugurated and became “iconic” thanks to a blockbuster movie (“Entrapment”) setting its climactic moment on their skybridge. Then, in 2004, Taipei broke the record with the 509-meter Taipei 101. Since then, tallest buildings have been constructed in New York, Mecca, Shanghai, Dubai (Burj Khalifa with 828 meters). There is no reason to believe new structures will not be planned. In this case, Changsha tower will only be one among many, and its construction will simply not be worth investment.  I understand that the “Sky City” could become Changsha and maybe even provincial China’s flagship. However, the same technology, if reliable, could be used to construct social housing for migrants, quickly and cheaply. This would make Changsha a truly innovative city and achieve global appeal in a much more sustainable way.

  1. LIU, E., (July 25, 2013), China starts work on tallest building, CNN, http://edition.cnn.com/2013/07/24/travel/sky-city-breaks-ground/index.html, accessed October 2, 2013 []
  2. Sky city tower halts construction after just 10 days’ work, Curbed.com, http://curbed.com/tags/sky-city-tower, accessed October 2, 2013 []

Sebastien Goulard

Ph.D. in political science (EHESS, Paris); M.A. in social sciences (EHESS, Paris); M.A. in international relations (IRIS, Paris), B.A. (Hons) in international political studies (ESE – Nottingham Trent University)

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China’s future and scarcity

Ma, Damien and Adams, William (2013). In line behind a billion people : how scarcity will define China’s ascent in the next decade. Pearson Education, FT Press, 352 p. ISBN: 978-0-13-313389-9.

Within a decade, China will have the world’s largest economy. In this book, two China experts turn the conventional wisdom on its head, showing why China’s economic growth will constrain rather than empower it. Political analyst Damien Ma and global economist William Adams reveal why, having 35 years of ferocious economic growth, China’s future will be shaped by the same fundamental reality that has shaped it for millennia: scarcity. Ma and Adams drill deep into Chinese society, showing all the scarcities that will limit its power and progress. Beyond scarcities of natural resources and public goods, they illuminate China’s persistent poverties of individual freedoms, cultural appeal, and ideological legitimacy — and the corrosive loss of values and beliefs amongst a growing middle class shackled by a parochial and inflexible political system.

Download sample pages (Table of contents, Introduction and Index)

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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Chinese eco-cities: a perspective of land-speculation-oriented local entrepreneurialism

Chien, Shiuh-Shen. (2013) Chinese eco-cities: a perspective of land-speculation-oriented local entrepreneurialism. China information, 27, pp 173-196.

 Abstract

This article aims to critically review the recent phenomenon of eco-cities in China which has captured the attention of the city authorities since the 2000s. At the time of writing, more than 200 eco-city projects have been proposed, are under construction, or have even been partly or fully implemented. Many of these eco-cities are not retro-fitted development plans in the downtown areas but are new large-scale land development projects on the outskirts of municipalities. The impetus behind the current Chinese ‘new-town-style’ eco-cities can be viewed as the third round of post-Mao land development isomorphism. The first – development zones – took place in the 1980s, and the second – college towns – started from the late 1990s. In the post-Mao context, Chinese local entrepreneurialism, which is characterized by (1) inter-scalar strategies to formally and informally pursue projects and (2) novel discourses that seek to legitimize projects, is actually motivated by land finance. Therefore, Chinese eco-cities driven by land-speculation-oriented local entrepreneurialism are very likely to be yet another manifestation of spatial development fervour, which contributes to further local extra-budgetary revenue and generates social conflict as opposed to sustainable development.

Read full text on Sage Journals online (restricted access)

 

 

Monique Abud

Centre d’études sur la Chine moderne et contemporaine, EHESS, Paris, France

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